Gold Continues Decline with Strengthening Dollar
Friday, December 11th, 2009Friday, December 11, 2009
Gold is declining again today as the Dollar exhibits a broad-based rally in reaction to stronger than expect U.S. Retail Sales and Prelim UoM Consumer Sentiment data. Just as we saw last Friday, the Dollar is rallying with key U.S. data outperforming, reversing the correlation we’ve witnessed since the beginning of the economic crisis. Hence, we deduct that investors are speculating the encouraging improvements in U.S. employment and consumption could lead the Fed to reign in its monetary policy sooner than anticipated should data continue to print positively. Meanwhile, gold is exercising its negative correlation with the Dollar, declining on the news as we witness solid pullbacks in the EUR/USD and GBP/USD. That being said, investors should monitor the interaction of these aforementioned Dollar pairs as they reach key technical supports. Significant pullbacks in the EUR/USD and GBP/USD could yield further weakness in gold due to correlative forces.
Technically speaking, we’ve shifted our uptrend lines to compensate for today’s pullback. Gold still has multiple uptrend lines serving as technical cushions along with 12/9, 11/13, and 11/10 lows. Furthermore, the psychological $1100/oz level could serve as a reliable technical support should it be tested. As for the topside, we’ve placed a downtrend line on our chart, albeit a steep one. Additionally, gold faces topside technical barriers in the form of 12/9 and 12/7 highs along with the psychological $1150/oz and $1175/oz levels.
Present Price: $1121.25oz
Resistances: $1123.03/oz, $1128.34/oz, $1134.47/oz, $1141.42/oz, $1147.54/oz, $1152.85/oz
Supports: $1115.27/oz, $1110.77/oz, $1105.05/oz, $1100.15/oz, $1097.29/oz, $1089.12/oz
Psychological: $1100/oz, $1150/oz, $1175/oz
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